Objective Tax and Financial Planning Guidance for You and Your Retirement Accounts
Self-Directed IRAs & IRA LLCs
Per Section 408 of the Internal Revenue Code, there are only two investments that are disallowed in Individual Retirement Accounts: Collectibles (art, antiques, wine, etc.) and Life Insurance (additionally, IRAs are not eligible shareholders in Subchapter S Corporations). But everything else is fair game.
Real estate, promissory notes, tax liens, private equity investments. These are just a few of the perfectly legal and acceptable IRA investments and the best part is that most of these investments have very little correlation with traditional stock market investments. So in addition to diversifying your retirement portfolio with "non-traditional" assets, you're able to make investments that you understand and can monitor yourself.
Real estate, promissory notes, tax liens, private equity investments. These are just a few of the perfectly legal and acceptable IRA investments and the best part is that most of these investments have very little correlation with traditional stock market investments. So in addition to diversifying your retirement portfolio with "non-traditional" assets, you're able to make investments that you understand and can monitor yourself.
So now you're getting informed. The investment universe and the options available for your retirement accounts is growing larger every time you turn around. But before you go do anything, you need to find out what IRA "structure" works best for you based on what you want to invest in.
If the tax law allows you to invest your IRA in just about anything you want, why don't all banks, brokerage firms, insurance and mutual fund companies offer true self-direction for their IRA account holders?
Well, these large institutions specialize in the commoditization of financial transactions that can be best dealt with on a large computer server. This means they limit their customers to vanilla investments (stocks, bonds and mutual funds) that they can easily sell and monitor and not the ones that require any extensive administrative oversight.
Integrated Wealth Strategies, LLC specializes in working with self-directed custodians whose only business is to work with their customers who want to hold "non-traditional" investments in their retirement accounts.
Two basic structures for IRA Investing
If you've had these thoughts, call or email Integrated Wealth Strategies, LLC to determine which IRA structure works best for you.
One of the benefits here is that your LLC will have its own bank account and someone (you or some other manager of the LLC) will have check writing control over the LLC bank account. This can ease the burden of dealing regularly with the custodian, especially if an investment has many regular transactions (4 unit apartment complex for example). But keep in mind that a good self-directed Custodian does provide a valuable function, so you should not consider forming an LLC just to circumvent dealing directly with the Custodian.
Before you go gaga over the fact you can have more flexibility over your IRA funds with a checkbook, beware. Checkbook control is not for everyone. If you're not good at keeping a reconciled checkbook or keeping books and records, this option may not be for you. IRA Custodians do serve a useful purpose.
Remember, you're dealing with very important retirement funds here and one small mishap (i.e., use of your LLC checkbook for one personal purchase) can result in your IRA deemed distributed by the IRS and the entire IRA amount will be taxed in the year of distribution at ordinary income rates. Oh yea, the 10% pre 59 1/2 penalty may apply as well.